Free & Clear: May 2013

Seeing what we want to seeBy John Hood

I was thinking about state politics while mowing my lawn. Hey, don’t look at me like that — we all cope with the tedium of yardwork in different ways. Perhaps you listen to music or sports-talk radio. I listen to recordings of college lectures and argue with myself about political philosophy and economic theory. Anyway, looking across the driveway at my neighbor’s manicured carpet of dark fescue and comparing it with my pitiful spread of weeds and wire grass got me thinking about the current political moment. As North Carolina and the nation grapple with problems such as lackluster economic growth and mediocre educational outcomes, many people look across borders to find models for reform.

But in politics, the grass is not always greener on the other side. Politicians and activists tend to see other models in whatever way is most convenient for their arguments. For example, many liberal advocates of single-payer, government-run health insurance cite Canada as a model, contending that it ensures universal access to care while costing less than the U.S. approach. Conservatives point out the problems with the Canadian system — such as the extent to which patients who can afford it head south of the border for specialty care — and argue against the relevance of the Canadian model for America.

When it comes to economics, however, the roles reverse. Conservatives who advocate pro-growth fiscal and regulatory policies point to Canada as a model. Its combined marginal tax rates on business and investment, for example, are far lower than those in the United States, and Canada ranks higher on the Washington, D.C.-based Heritage Foundation’s Index of Economic Freedom, in part because of prudent budgeting and fewer regulations.

So conservatives want America to be more like Canada on economic policy, while liberals want America to be more like Canada on health policy. Their gaze over the metaphorical fence is colored by what they want to see, not what is actually there.

Here’s another place people of varying political stripes tend to see, well, stripes of varying colors: the Netherlands. Libertarians praise the country for its relatively lax social regulations on drugs and prostitution. Liberals admiringly observe that it provides universal health care (via a two-tiered system of government insurance and private supplemental plans) and imposes strict gun control. Conservatives favorably note that the education system has had extensive parental choice and competition for nearly a century, with more than two-thirds of Dutch students attending what we would call private or charter schools, compared with only about 10% of American students. Per-pupil costs are about 20% less than they are in North Carolina’s system while student achievement is much higher, especially in math. The Dutch tax system is friendlier to economic growth and investment than ours, with an effective capital-gains tax rate on corporate equities of 25%, about half the U.S. rate (figuring in taxes at all levels and the effect of corporate and individual levies).

Depending on your ideology, you may see broad tufts of green in particular Dutch policies. But there are weeds if you look closely. The Dutch certainly don’t think they have everything right. Their legislators are considering laws to discourage foreign involvement in the domestic drug and sex trades. Large-scale immigration is putting tremendous pressure on its welfare state, including its health-care and education systems, where some Muslim students are using tax money to attend schools that teach extremist ideology. Despite favorable tax policies, the Dutch economy suffered along with most Western economies after the onset of the Great Recession and has experienced contraction of its gross domestic product four of the past six quarters. As for crime, the Netherlands has one of Europe’s lowest gun-ownership rates and one of its highest murder rates. In 2011, it was the site of a horrific shooting that killed seven people.

Learning from other public-policy models — be they across the Atlantic or just over the state line in Virginia or Tennessee — requires that we understand details rather than generalities. We must consider alternative explanations before assuming cause and effect (the economic health of Texas, for example, is not unrelated to the riches that can be found beneath the surface of its sprawling land mass). It requires that we stop looking for perfection and welcome marginal improvements.

That having been said, I do think North Carolina ought to follow the Netherlands’ lead by adopting pro-growth tax and pro-parent education policies. Everything else being equal, these ideas would make our state healthier — a little greener, let’s say.

John Hood is chairman and president of the John Locke Foundation. You can reach him at jhood@johnlocke.org.